RBI asks banks to closely monitor loans to telecom sector
PrintListen to this Article
.
The sector has a debt of about Rs 4.6 lakh crore even as it is faces pressure on revenues and profitability in the wake of cut-throat competition following entry of Reliance Jio.
The Reserve Bank said banks have been asked to put in place a Board approved policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors.
"More immediately, as the telecom sector is reporting stressed financial conditions, and presently interest coverage ratio for the sector is less than one, boards of directors of the banks may review the telecom sector latest by June 30, 2017...," it said in a notification.
Interest coverage ratio indicates capacity of an organisation to service the debt and ability to repay it over the tenure of the loan.
It further asked banks to "consider making provisions for standard assets in this sector" at higher rates so that necessary resilience is built in the balancesheets "should the stress reflect on the quality of exposure to the sector at a future date". Besides, banks should also subject the exposure to the telecom sector to closer monitoring, it added.
The RBI further said bank boards should frame policy on making provisions for standard assets at higher rates at least once a quarter. The review should be to access performance of various sectors of the economy to which the bank has an exposure to evaluate the present and emerging risks and stress therein.
"The review may include quantitative and qualitative aspects like debt-equity ratio, interest coverage ratio, profit margins, ratings upgrade to downgrade ratio, sectoral non-performing assets and stressed assets, industry performance and outlook, legal and regulatory issues faced by the sector, etc. The reviews may also include sector specific parameters," the RBI added.
In another notification, the RBI has prescribed a format for banks to disclose in the 'Notes to Accounts' to the financial statements.
This, the RBI said, is being done to ensure greater transparency and promote better discipline with respect to compliance with income recognition, asset classification and provisioning (IRACP). NKD MBI CS ARD #casansaar (Times of India)
Category : RBI | Comments : 0 | Hits : 405
RBI has issued draft rules to tighten dividend payouts by banks by linking distributions to capital adequacy, asset and profit quality, setting a uniform prudential framework effective from FY27. In the previous financial year, banks paid over Rs 75,000 crore dividend after booking record profits. Under RBI's draft rules, dividend payments by banks will be governed by a common set of conditions from FY27. The directions apply to all banking companies, corresponding new banks and SBI, and ...
Listing of an Indian company on international stock exchanges got a push with the Reserve Bank of India (RBI) coming out with regulations under Foreign Exchange Management (FEMA). Experts believe new regulations will help companies utilise foreign exchange more effectively. Regulations have been made public through two notifications. First set of regulations deals with mode of payment and reporting of non-debt instruments. “The proceeds of purchase / subscription of equity shares of an ...
The Lok Sabha elections 2024 are in full swing with electioneering adding much colour to the entire process. However, to ensure that there is no wrongdoing, the Reserve Bank of India (RBI) has sent a missive to Payment System Operators (PSOs) asking them to keep a watch on all suspicious high-value transactions that they may come across in their systems. The general purpose of the letter is to deny the use of electronic fund transfer mechanism to anyone who is intending to influence the election...
he Reserve Bank on Tuesday came out with draft guidelines to further strengthen regulations on payment aggregators, a move aimed at boosting the payment ecosystem. The draft also covers the physical point-of-sale activities of payment aggregators (PAs). The RBI said that given the growth in digital transactions and the significant role that PAs play in this space, the current directions on PAs are proposed to be updated and cover, inter alia, KYC and due diligence of merchants, operations ...
The RBI on Monday eased rules to allow resident entities to hedge their exposures to the price risk of gold using the OTC derivatives in the International Financial Services Centre (IFSC) in addition to the derivatives on the exchanges in the IFSC. Resident entities such as banks were permitted to hedge their exposure to the price risk of gold on the exchanges in the IFSC that are recognised by the International Financial Services Centres Authority (IFSCA), and the new directive provides them...
Comments